Barry Schwartz, chief investment officer and portfolio manager of Baskin Wealth Management
Focus: North American large cap stocks
MARKET OUTLOOK:
Many investors and economists are excited about the next few years for the global economy, and some believe that 2021 will be the best year for the U.S. economy in over 35 years. It seems likely that corporate America will have a V-shaped recovery in revenue, earnings, and profit margins.
Almost every commodity you can name (oil, copper, lumber etc.) has seen big price movements in anticipation of demand for capital goods. Canada is a major exporter of these inputs, and many expect our economy to grow significantly stronger as a result. This probably explains why the Canadian dollar reached 80 cents recently, its highest price against the U.S. dollar since 2018.
It is possible that a lot of the good news is already priced into the stock market. Stock markets look forward, not backwards, and the anticipated strong recovery this summer started making stocks move up since last fall. In addition, as the economy begins to roar back, it is possible that interest rates will continue to climb, which can make stocks seem less attractive versus the safety of bonds and GIC’s.
We are extremely bullish on the underlying fundamentals of the companies in our portfolios. From top to bottom, we see many years of growing earnings, share buybacks, increasing dividends and healing balance sheets. The companies most hurt by COVID, like Live Nation, Visa, and Vail Resorts, should see tremendous rebounds, as pent-up consumer demand for experiences and travel should return later this year. The companies that benefitted most by COVID, like Amazon, Apple, and Netflix, should continue to have many years of great growth ahead— the pandemic lockdowns and precautions brought these companies millions of new customers seemingly overnight, and the new habits formed by staying at home will stick.
TOP PICKS:
PayPal operates one of the largest e-commerce payments platforms with 377 million users making payments and sending money through their PayPal and Venmo accounts. E-commerce penetration is still just at 17 per cent in the U.S. and the tailwinds have accelerated with the COVID pandemic. We believe PayPal can leverage its dominant position with consumers and merchants to add new products including Buy-Now-Pay-Later, cryptocurrency purchases, and bill payments, leading to a stickier relationship with customers.
Netflix is the largest streaming entertainment company in the world and benefited significantly from COVID-related shutdowns. Netflix's global scale with 204 million paid subscribers allows it to have superior economics in creating and distributing high quality content relative to newer entrants, and we believe this advantage will become increasingly apparent as new competitive streaming products are launched. We expect Netflix will be the dominant media company for decades to come and Netflix's profits will grow as it scales around the world.
TMX Group is the operator of the TSX and TSX Venture exchanges and benefited from the stock market volatility through 2020. TMX has diversified itself from a cyclical listings company to a less regulated and stable recurring-revenues businesses such as Trayport, and extended trading hours for its derivatives platform that should drive more revenues from Asia. With a clean balance sheet, we expect TMX to make acquisitions to further grow its business.
PAST PICKS: May 4, 2020
Facebook (FB NASD)
- Then: $205.26
- Now: $299.99
- Return: 46%
- Total Return: 46%
American Tower (AMT NYSE)
- Then: $236.63
- Now: $238.83
- Return: 1%
- Total Return: 2%
Copart (CPRT NASD)
- Then: $78.00
- Now: $109.62
- Return: 41%
- Total Return: 41%
Total Return Average: 30%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| FB NASD | Y | Y | Y |
| AMT NYSE | Y | N | Y |
| CPRT NASD | Y | N | Y |
Website: www.baskinwealth.com
Personal Twitter: @BarrySchwartzBW
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